Forecast butter and milk powder shortages could limit the EU’s ability to keep up with domestic and global demand, according to chocolate and confectionery trade group CAOBISCO.

In an internal report shown to ConfectioneryNews, the Association of Chocolate, Biscuit and Confectionery Industries of Europe (CAOBISCO) said that providing EU milk deliveries reach 140 million tons with a modest increase of cheese manufacturing, there will be less butter and milk powders available in the 2013/14 marketing year.

Increased exports of dairy products and reduced milk production volumes have meant that EU butter production levels declined significantly in the first few months of 2013. This has meant that the EU domestic market supply of butter is now experiencing a severe shortage, leading to higher prices that CAOBISCO says are detrimental to industrial users and consumers with only very limited and deferred benefits for dairy farmers.

The EU dairy sector: Developing beyond 2015

CAOBISCO took this week’s European Commission conference "The EU dairy sector: developing beyond 2015" as an opportunity to outline its industry perspective on the future of the sector.

In an official statement it stated its political agreement with the European Parliament’s decision to reject proposals to enforce milk supply management in times of crisis as part of the CAP (Common Agricultural Policy) Reform agreed in June this year. This suggested system would have seen EU member states that had increased production levels paying a penalty, and countries that had cut back being given aid.

CAOBISCO said: “Restricting production volumes would not have helped farmers to be more efficient or competitive, but instead making them again overly reliant on EU support measures and dampening any ambition to be competitive on the global market.

“However, due to the seasonality of production and consumption, the management of stocks is key for the stability of the dairy market and to avoid extreme volatility. Therefore, CAOBISCO would like to express its support to the European Dairy Association’s position to maintain public intervention purchasing as an emergency safety net in case of extreme price volatility, and this, until there are valuable private sector solutions in place.”

CAOBISCO said it supports private storage aid as the best means of managing stocks of butter but were concerned about the extension of this scheme to September in light of the current market situation.

“To extend the period of intervention buying or private storage of butter would take out volumes in a period when production is seasonally low and when CAOBISCO industries need sufficient supplies to respond to manufacturing demand during the last quarter of the year,” it said.

Global demand

According to data published by the European Commission
, Oceania and US quotations of butter are on a downward trend, while EU prices increased to €400 (US$540) per 100kg in mid-June 2013.

Within milk powder EU prices are in line with those of the key export countries like the US and Brazil, with prices returning to 2007 market crisis levels.

The internal CAOBISCO report forecasts that global exports will rise as the partial suspension of milk powder imports from Oceania due to the botulism scare is likely to mean an increased demand for powders produced in Europe in the coming months.

“All in all, CAOBISCO companies need to have guaranteed supplies of dairy ingredients all along the marketing year which are cost effective, in order to be competitive on the world market. This needs to be accompanied by a gradual decrease in import restrictions as well,” said the association.

“CAOBISCO supports a healthy competitive EU dairy supply chain, which maintains its world leadership supporting the growth of milk production in order to respond to world demand,” it added.

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